BUILDING YOUR NON-LENDER APPRAISAL BIZ- PART 1

Nobody goes into business to fail. Nobody starts up a venture with the hope that eventually they will be broke, starving, worn out, and looking for a part time job. People go into business for themselves for a variety of reasons, almost all of them personal, but most of those reasons revolve around the ideas of freedom, independence, security, having more control over one’s destiny, and creating more income. The great thing about the age we live in is that success leaves clues, others have successfully come before us, and there are breadcrumbs along the way that can lead us either down a path toward prosperity and freedom, or down a path toward the tough decisions facing many people around the world today in a changing economy.  

In this episode, I’m going to be speaking primarily to my brothers and sisters in the real estate appraisal industry as that is the industry I work in, coach in, evangelize in, and is near and dear to my heart. Like many industries affected by the changes in interest rates and the shifting economy, many appraisers are struggling, and struggling bad right now. Most of you have been living a really good life with an overabundance of business over the last 10 years or so, but, as all good things must come to an end, it would seem that is the story being written for so many. And why? The answer to that question lies in several areas and activities that we’re going to talk about in today’s show, with the main big idea falling squarely on the side of diversification.  

Diversification, or the lack of it, is one of the big reasons so many real estate appraisers are struggling to make ends meet in the last quarter or 2022 and into this first quarter of 2023. The vast majority of appraisers come into the business to serve the massive lending market and fulfill the demand in that niche. Afterall, the lending side of the appraisal business is the largest segment of the business, by far. Like everything, it has its pros and its cons, but one of the big pros of that side of the business is that you just have to get your name added to a lender panel or rotation of appraisers and you’re all but guaranteed to get a steady flow of business. Or at least that’s the way it’s been in the past.

Today, however, it would seem that the ones surviving this downturn are the ones that have done two main things: they’ve focused on the relationship building within their markets and work hard to become the trusted advisor in the market, and they’ve diversified their business mix to include non-lending appraisal services.

In this episode, we’re going to go over 5 areas appraisers need to focus on if they want to break into the non-lending world of appraising and begin to diversify their business outside of the lending world, a world that rises and falls with interest rates, Fed policy, housing demand, and home prices. We’re also going to talk about 3 of the biggest mistakes appraisers make when they try to break into the non-lending world of real estate appraisal. Let’s jump in!

Good morning my friends, my name is Blaine Feyen and I am your host for this, and every episode of the always sponsor free, Real Value Show. If you’re looking for ways to enhance and diversify your appraisal business by getting into the world of non-lending appraisal work, I’ve got a special gift for you just for being a listener of the podcast or follower of this show. It’s a value packed Action Plan for Diversifying Your Appraisal Business. It’s completely free, my gift to you, with the hope that some of you can jump in quickly, take some action today and, within 30 days or so, be cashing the checks from a completely different segment of the market than what maybe you’re used to. Just go to www.CoachBlaine.com/diversify to download an information packed video to help you build a profitable non-lender based appraisal business. This is my way of giving back to the industry that has given so much to me and sharing my knowledge and experience having built a sizeable non-lending appraisal business in my market. If you have any interest whatsoever in expanding the type of clients and the type of business available to you, the 30-day action plan may just be of value for you. 

So, let’s talk about something that many of us have been talking about for many years. I’ve been doing episodes on the topic for all five years of this podcast and coaching on it for at least 5 years prior to that, and that’s diversifying your appraisal business. Diversification is an important business strategy in almost any business. It’s a way to hedge against big shifts in one segment of your business. It’s quite easy to see the pain flowing through all of the related real estate industries like the sale side, the lending side, inspections, and, of course, appraisal. The vast majority of appraisers serve one primary master, and that’s the lending industry. And why not? After all, appraisals for lending purposes make up the largest segment of the business, and some would argue the easiest segment of the business. You essentially just get your name on a lender panel, and you start getting orders that you don’t have to really nurture to keep. As long as that client is happy with your work, your turn times, your communication and revision rates, you’re pretty much guaranteed a steady stream of business with no skills beyond knowing the basics of appraising required.

We’re pretty much past the point of waking people up to the need for diversification since the market has, more or less, done that for us. We’re now hearing lots of people talking about trying to start doing non-lender type appraisal work, which is probably a smart decision. There’s just one big problem: getting and keeping that business is not the same as getting and keeping the lending business. The non-lender side of the appraisal industry requires a whole different set of skills beyond knowing how to appraise real estate.

 So, who is this episode for? It’s for those who know they need to diversify at least some of their business mix for security and longevity. It’s for those who are extremely slow right now because they’ve been so heavily weighted on the lending side of the business mix. It’s for those who want to get better work all around, which includes better lending clients as well. And it’s for those who want to build a solid business that weathers all the storms of market shifts, interest rate changes, changes in housing supply, and all the other factors that affect the lending side of the appraisal business. If you resonate with any of those reasons, get out a pad and pen and start to take some notes because I’m going to be laying out the foundation for creating a profitable segment of your appraisal business doing non-lending appraisals.

Before we go into the tactical and practical of it all, let’s talk briefly about the required mindsets for developing a robust non-lending appraisal business. The first mindset is simply the mindset of being the trusted guide instead of always trying to be the hero in the client’s story. The goal is to make them feel like and become the hero by reaching out and selecting you as their guide. Develop your messaging, your language, your scripts, and how you speak to your clients from the position of being the most helpful and trusted guide that inspires confidence in them that you can solve their problem.

 When you’ve built a business serving bigger institutional clients like banks and AMCs, you tend to get a tad complacent with the customer service because you’ve been talking to portals and faceless entities to bid for work and give updates. If you want to do well in the non-lender side of the appraisal business, it helps to develop some a real customer service mindset because you’ll be dealing with human beings that don’t understand the language, the buzz words, the industry speak, the process, or what exactly to ask for. The helpful guide in you can help them by taking them by the hand and walking them through the process in a friendly and helpful way.

 The next mindset I think you need to have going into this is one of differentiation. If you’re not being different somehow, you’ll be in the same boat you were in with the lending world, which is one of almost no differentiation. Lenders choose appraisers primarily based on location and price because the industry has been commoditized to a large degree. The way you ‘decommoditize’ yourself is by being different. You’ve got to add value to your interactions with people, and you have to think in terms of solving big problems for the people that reach out to you.

 One of the ways that you make yourself different in the non-lending side of things is with what I call a ‘push to talk’ mindset. Remember when the Nextel phones came out with the walkie-talkie style phones that you could push to talk to your people instead of calling them? Well, this is not that! Push to talk is my reference to pushing people gently toward a phone call if they’ve reached out via some other method like email, text, your contact us page, or your Google Business Profile. The idea is to start gathering some info through questions, but then ask if there is a good number to reach them at to get a little more info. We’ve found that when we get people on the phone, with good scripts, good questions, and a friendly tone, the odds go way up that you’ll be able to craft a solution to their problem and, here’s the key, price becomes a non-issue. Price is only an issue when they don’t know you, like you, or trust you yet so they’re comparing you against everyone else they’ve reached out to who already quoted them a fee.

 Push them to a phone call and finish with this last mindset, which is that everybody has options. The options mindset is also a technique, but it has to be a mindset first. We must always be in the frame of mind that, as we gather more info on their problem and needs, we’re thinking about the different options we can present to them. The most important part of the options mindset is in telling them that they have options. You see, when people are reaching out to hire somebody for a task they can’t perform themselves, they have some anxiety around it because they never know if they’ll be taken to the cleaners, are they going to be over-charged, will they ask the right questions, and so on. If you say to people, ‘listen, I want you to know you have some options…’, you are giving them back some of the control they thought they lost by having to reach out to you. Say the words, ‘I want you to know you have some options…’

 From the mindsets, we can now move into the skills portion. If you think the only skill you need to be prosperous in the non-lending segment of the appraisal business is knowing how to appraise a home, you’d be wrong. Yes, that is one of the minimum requirements to do this kind of work, but here’s what I’d say about that; when you step into the world of appraising for non-lending purposes, you have to go beyond the form filling that is so often done in the lending side of this business. You have to have at least a basic grasp of the deeper principles and practices of appraising, writing better narrative and explanations of what you did, why you did it, what you’re thinking, much more complete reconciliations of your methods and rationale, and do it in language your customer can understand.

 The other skill that I think you have to have in the non-lending appraisal world is the skill of creativity. The rules we have to follow as appraisers are rules around ethics, reporting, and the standards set forth by USPAP, not the methods utilized to produce an opinion of value. You are not required to deliver an opinion of value on a specific form, for example. You don’t have to utilize a sales comparison grid. You don’t have to include pictures. You don’t have to use original comp photos, or comp photos at all. You don’t have to comment on gross and net adjustments, predominant values in the neighborhood, single line adjustments, and much of the stuff that appraisers have been raised in the lending world to believe are requirements for appraising real estate. They’re not! Those are lender guidelines, not appraisal guidelines. Learn some creative methods for solving specific problems in the non-lending appraisal world and you’ll be far more successful and sought after than if you stay in the box of appraising like in the lender world.

We’ve already talked in the mindsets portion about good customer service skills and mindset, but it deserves a mention in the skills portion as well because we’re playing the long game. The long game in any business is relational over transactional. It’s thinking about each and every interaction as an interview for more business. Remember that we’re trying to build something here and that means seeing everyone as an opportunity for referral to somebody else. It means working your butt off to earn a 5 star review on Google and the explicit endorsement of you and your services to their friends, family, colleagues, and neighbors.

One of the extensions of good customer service skills is an understanding that the service doesn’t end when the report has been delivered and the payment made. Every business has a before phase, a during phase, and an after phase and you must take care of all three phases to be successful in business. In the world of non-lending appraisal work, the after phase of the business is the follow up a week or two after the report has been delivered to see if there are any questions you can answer or parts of the report you can make more clear.

The after phase of the process is, by the way, the third time you will have asked for a Google review. The first time is right after the inspection process, the second time is when the report has been delivered, and the third time is when you follow up a week or two later to make sure they’re happy and have an understanding of the report. If all of this is sounding like too much for you, I’m not saying you can’t build a non-lender appraisal business, you just won’t have as much success with referrals and endorsements in the market if you don’t treat the business like a high-end custom provider of services. This means having some basic systems within your business to ensure you are doing the necessary follow up.

One of the things I’ll recommend in the skills department is knowing how to use screen capture video software like Loom, SnagIt, or BombBomb. When it comes to providing over the top service on the non-lending side of the house, doing short screen capture videos of certain parts of the report will gain you tremendous respect from your customers, not to mention massive credibility. These are the kinds of things they’ll talk about when the topic comes up. Why is this so powerful? Because you’ll be giving your clients more than just a pdf and a bill, you’ll be giving them your literal voice, your knowledge and insights, and most importantly, your time.

In next week’s episode, we’ll recap the foundation we’ve been laying in this episode, we’ll add to it what I call, the minimum cost of entry, which is a website, SEO, your Google Profile, some scripts for getting reviews, some scripts for talking with people on the phone, and some extra things you can do to get business today. We’ll then wrap up this series with what I call rocket fuel activities. These are the special little things we’ve been testing and perfecting over a 12-year period which has helped build a very robust non-lending division of our firm.

To watch the ‘How to Diversify Your Appraisal Business Webinar’, just go to www.CoachBlaine.com/diversify

 Until next week, I’m out…